One 77-year-old’s search for the truth: 9/11, election fraud, illegal wars, Wall Street criminality, a stolen nuke, the neocon wars, control of the U.S. government by global corporations, the unjustified assault on Social Security, media complicity, and the "Great Recession" about to become the second Great Depression. "The most important truths are hidden from us by the powerful few who strive to steal the American dream by keeping We the People in the dark."

Since
July, American households -- which account for almost all mutual fund
investors -- have pulled money both from mutual funds that invest in
stocks and those that invest in bonds. It’s the first time since 2008
that both asset classes have recorded back-to-back monthly withdrawals,
according to a report by Credit Suisse.

Credit Suisse estimates
$6.5 billion left equity funds in July as $8.4 billion was pulled from
bond funds, citing weekly data from the Investment Company Institute as
of Aug. 19. Those outflows were followed up in the first three weeks of
August, when investors withdrew $1.6 billion from stocks and $8.1
billion from bonds, said economist Dana Saporta.

“Anytime
you see something that hasn’t happened since the last quarter of 2008,
it’s worth noting,” Saporta said in a phone interview. “It may be that
this is an interesting oddity but if we continue to see this it could
reflect a more broad-based nervousness on the part of household
investors.”

Withdrawals from equity funds are usually accompanied
by an influx of money to bonds, and an exit from both at the same time
suggests investors aren’t willing to take on risk in any form. While
retail investor sentiment isn’t the best predictor of market moves,
their reluctance could have significance, Saporta said.

“It might
suggest households are getting nervous about holding investments, and
that could lead to some real economic implications including cutting
back on spending,” she said. “Should the market turn lower again, it
will be interesting to see if we have the traditional move back into
bonds or if households move to cash.”

After an 11 percent plunge
in the Standard & Poor’s 500 in the past week, investors are
searching for signs of strength in the U.S. economy in the face of
slowing growth abroad. The S&P 500 gained 2.4 percent Thursday as
data showed gross domestic product rose at a 3.7 percent annualized
rate, exceeding all estimates of economists surveyed by Bloomberg.

While
the flows out of mutual funds suggest retail investors -- who held 89
percent of U.S. mutual fund assets last year, according to ICI -- may
not have faith in financial markets, recent economic data show the
average American is spending more. Sales at U.S. retailers rose 0.6
percent in July and the prior two months were revised up, according to
Commerce Department data on Aug. 13.

Are we witnessing the corruption of central banks? Are we observing
the money-creating powers of central banks being used to drive up prices
in the stock market for the benefit of the mega-rich?

These questions came to mind when we learned that the central bank of
Switzerland, the Swiss National Bank, purchased 3,300,000 shares of
Apple stock in the first quarter of this year, adding 500,000 shares in
the second quarter. Smart money would have been selling, not buying.

Among this list of the Swiss central bank’s holdings are stocks which
are responsible for more than 100% of the year-to-date rise in the
S&P 500 prior to the latest sell-off.

What is going on here?

The purpose of central banks was to serve as a “lender of last
resort” to commercial banks faced with a run on the bank by depositors
demanding cash withdrawals of their deposits.

Banks would call in loans in an effort to raise cash to pay off
depositors. Businesses would fail, and the banks would fail from their
inability to pay depositors their money on demand.

As time passed, this rationale for a central bank was made redundant
by government deposit insurance for bank depositors, and central banks
found additional functions for their existence. The Federal Reserve,
for example, under the Humphrey-Hawkins Act, is responsible for
maintaining full employment and low inflation. By the time this
legislation was passed, the worsening “Phillips Curve tradeoffs” between
inflation and employment had made the goals inconsistent. The result
was the introduction by the Reagan administration of the supply-side
economic policy that cured the simultaneously rising inflation and
unemployment.

Neither the Federal Reserve’s charter nor the Humphrey-Hawkins Act
says that the Federal Reserve is supposed to stabilize the stock market
by purchasing stocks. The Federal Reserve is supposed to buy and sell
bonds in open market operations in order to encourage employment with
lower interest rates or to restrict inflation with higher interest
rates.

If central banks purchase stocks in order to support equity prices,
what is the point of having a stock market? The central bank’s ability
to create money to support stock prices negates the price discovery
function of the stock market.

The problem with central banks is that humans are fallible, including
the chairman of the Federal Reserve Board and all the board members and
staff. Nobel prize-winner Milton Friedman and Anna Schwartz
established that the Great Depression was the consequence of the
failure of the Federal Reserve to expand monetary policy sufficiently to
offset the restriction of the money supply due to bank failure. When a
bank failed in the pre-deposit insurance era, the money supply would
shrink by the amount of the bank’s deposits. During the Great
Depression, thousands of banks failed, wiping out the purchasing power
of millions of Americans and the credit creating power of thousands of
banks.

The Fed is prohibited from buying equities by the Federal Reserve
Act. But an amendment in 2010 – Section 13(3) – was enacted to permit
the Fed to buy AIG’s insolvent Maiden Lane assets. This amendment also
created a loophole which enables the Fed to lend money to entities that
can use the funds to buy stocks. Thus, the Swiss central bank could be
operating as an agent of the Federal Reserve.

If central banks cannot properly conduct monetary policy, how can
they conduct an equity policy? Some astute observers believe that the
Swiss National Bank is acting as an agent for the Federal Reserve and
purchases large blocs of US equities at critical times to arrest stock
market declines that would puncture the propagandized belief that all is
fine here in the US economy.

We know that the US government has a “plunge protection team”
consisting of the US Treasury and Federal Reserve. The purpose of this
team is to prevent unwanted stock market crashes.

Is the stock market decline of August 20-21 welcome or unwelcome?

At this point we do not know. In order to keep the dollar up, the
basis of US power, the Federal Reserve has promised to raise interest
rates, but always in the future. The latest future is next month. The
belief that a hike in interest rates is in the cards keeps the US dollar
from losing exchange value in relation to other currencies, thus
preventing a flight from the dollar that would reduce the Uni-power to
Third World status.

The Federal Reserve can say that the stock market decline indicates
that the recovery is in doubt and requires more stimulus. The prospect
of more liquidity could drive the stock market back up. As asset bubbles
are in the way of the Fed’s policy, a decline in stock prices removes
the equity market bubble and enables the Fed to print more money and
start the process up again.

On the other hand, the stock market decline last Thursday and Friday
could indicate that the players in the market have comprehended that the
stock market is an artificially inflated bubble that has no real basis.
Once the psychology is destroyed, flight sets in.

If flight turns out to be the case, it will be interesting to see if
central bank liquidity and purchases of stocks can stop the rout.

Michael Hudson, the author of Killing the Host: How Financial Parasites and Debt Destroy Global Economy, says the stock market crash on Monday
has very little to do with China and all to do with shortermism and
buybacks of corporations inflating their own stocks - August 25, 2015

Michael Hudson is a Distinguished Research Professor of Economics at the University of Missouri, Kansas City. He is the author of The Bubble and Beyond and Finance Capitalism and its Discontents. His most recent book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy.

As in many cities around the US, prices are soaring, buyers are going
nuts, sellers run the show, realtors are laughing all the way to the
bank, and the media are having a field day.Nationwide, the median price of existing homes, at $236,400, as the National Association of Realtors
sees it, is now 2.7% higher than it was even in July 2006, the insane
peak of the crazy housing bubble that blew up with such spectacular
results.

Housing Bubble 2 has bloomed into full magnificence:

In many cities, the median price today is far higher, not just a
little higher, than it was during the prior housing bubble, and
excitement is once again palpable. Buy now, or miss out forever! A
buying panic has set in.

And so the July edition of D Magazine – “Making Dallas Even Better,”
is its motto – had this enticing cover, sent to me by David in Texas,
titled, “The Great Dallas Land Rush”:

The “Boom Town,” as it’s now called, is where the housing market has
gone completely out of whack, with a median condo price at $1.13 million
and the median house price at $1.35 million. This entails some
consequences [read… The San Francisco “Housing Crisis” Gets Ugly].

The fact that Housing Bubble 2 is now even more magnificent than the
prior housing bubble, even while real incomes have stagnated or declined
for all but the top earners, is another sign that the Fed, in its
infinite wisdom, has succeeded elegantly in pumping up nearly all asset
prices to achieve its “wealth effect.”

And it continues to do so, come heck or high water. It has in this ingenious manner “healed” the housing market.But despite the current “buying panic,” the soaring prices, and all
the hoopla round them, there is a fly in the ointment: overall
homeownership is plunging.

The homeownership rate dropped to 63.4% in the second quarter, not
seasonally adjusted, according to a new report by the Census Bureau,
down 1.3 percentage points from a year ago. The lowest since 1967!

The process has been accelerating, instead of slowing down. The 1.2 percentage point plunge in 2014 was the largest annual drop in the history of the data series going back to 1965. And this year is on track to match this record: the drop over the first two quarters so far amounts to 0.6 percentage points.This accelerated drop in homeownership rates coincides with a sharp increase in home prices. Go figure.The plunge in homeownership rates has spread across all age groups, but to differing degrees. Younger households have been hit the hardest. In the age group under 35, the homeownership rate in Q2 saw a slight uptick to 34.8%, from the dismal record low of 34.6% in the prior quarter. Either a feeble ray of hope or just one of the brief upticks, as in the past, to be succeeded by more down ticks on the way to lower lows.This chart by the Economics and Strategy folks at National Bank Financial shows the different rates of homeownership by age group. The 35-year and under group is where the first-time buyers are concentrated; and they’re being sidelined, whether they have no interest in buying, or simply don’t make enough money to buy (represented by the sharply descending solid black line, left scale). Note how the oldest age group (dotted blue line, right scale) has recently started to cave as well:

The bitter irony? In the same breath, the Census Bureau also reported
that the rental vacancy rate dropped to 6.8%, from 7.5% a year ago, the
lowest since 1985. America is turning into a country of renters.

This chart shows the dynamics between homeownership rates (black
line, left scale) and rental vacancy rates (red line, right scale) over
time: they essentially rise and dive together. It makes sense on an
intuitive basis: as people abandon the idea of owning a home, they turn
into renters, and the rental market tightens up, and vacancy rates
decline.

This too has been by design, it seems. Since 2012, private equity
firms bought several hundred thousand vacant single-family homes in key
markets, drove up prices in the process, and started to rent them out.
Thousands of smaller investors have jumped into the fray, buying homes,
driving up prices, and trying to rent them out. This explains the record
median home price across the country, and the totally crazy price
increases in some key markets, even as regular Americans are trying to
figure out how to pay for a basic roof over their heads.

This has worked out well. By every measure, rents have jumped.
According to the Census Bureau’s report, the median asking rent in the
US rose 6.2% from a year ago, and 17.6% since 2011. So inflation bites.
But the Fed is still desperately looking for signs of inflation and
simply cannot find any.

And how much have incomes risen over these years to allow renters to
meet these rising rents? OK, that was a rhetorical question. We already
know what has been happening to incomes.

That’s what it always boils down to in the Fed’s salvation of the
economy: people who can’t afford to pay the rising rents with their
stagnant or declining incomes should borrow the money to make up the
difference and then spend even more on consumer goods. After us, the
deluge.

An article on Sputnik by Ekaterina Blinova, http://sputniknews.com/politics/20150815/1025789574.html
, provides a history of US and British plans to destroy the Soviet
Union with nuclear weapons in the early post-World War II years before
the Soviets got the bomb and prior to President John F. Kennedy reining
in the plans to use nuclear weapons against Soviet civilian populations.
If truth be known, the Cold War was entirely a Washington creation.

The military/security complex, against which President Dwight
Eisenhower warned the American people to no avail, has found that its
profits cannot survive the end of the Cold War and has orchestrated its
resumption. Washington has revived its plans for surprise nuclear
attack on Russia and this time on China as well. These plans are known
and have destroyed the trust among nuclear powers, leading to an even
more dangerous situation than existed during Cold War I.

The American people are not politically competent, and they are
easily brainwashed by Washington’s propaganda. It has only taken two
years for Washington’s demonization of Russia to convince hapless
Americans that Russia is the Number One Threat to the United States.
This unbelievable hogwash is constantly broadcast by the presstitute
media and is now believed by a majority of the American Sheeple.

It appears that the Russian government has made a mistake with regard
to its approach to the breakaway Republics consisting of Russian
peoples in former Russian territories who reject being governed by the
anti-Russian coup government installed in Kiev by Washington. The
Russian government could have ended the crisis by accepting the requests
of these territories to be reunited with Russia. Instead, the Russian
government opted for a diplomatic approach—hands off Donetsk and
Luhansk—and this diplomacy has now failed. The coup government in Kiev
never had any intention of keeping the Minsk agreement, and Washington
had no intention of permitting the Minsk agreement to be kept.
Apparently, even the realistic Putin succumbed to wishful thinking.

The Minsk agreement, which the Russian government backed for
diplomatic reasons, has served to allow Washington time to train, equip,
and mobilize much stronger forces now preparing to resume the attack on
Donetsk and Luhansk. If these Republics are overrun, Vladimir Putin
and Russia itself will lose all credibility. Whether Putin realizes it
or not, Russia’s credibility is at stake on the Donetsk frontier, not in
diplomatic meetings with Washington’s European vassals who are
powerless to act outside of Washington’s control. If Washington prevails
in Ukraine, Russia and China can forget about the BRICS and Eurasian
trade groups offering alternatives to Washington’s economic hegemony.
Washington intends to ensure its hegemony by prevailing in Ukraine.

In his description of the situation, the leader of the Donetsk
Republic appears to be worn down by having lost the advantages over
Ukraine that Donetsk had prior to the failed Minsk agreement: http://russia-insider.com/en/moscows-top-man-donbass-says-all-out-war-will-start-soon-video/ri9255
Perhaps he is thinking of Shakespeare’s Julius Caesar when Cassius says
to Brutus, “There is a tide in the affairs of men which, when taken at
the flood, leads on to fortune, omitted, all the voyage of their life is
bound in shallows and miseries.”

“Next the statesmen will invent cheap lies, putting the blame upon
the nation that is attacked, and every man will be glad of those
conscience-soothing falsities, and will diligently study them, and
refuse to examine any refutations of them; and thus he will by and by
convince himself that the war is just, and will thank God for the better
sleep he enjoys after this process of grotesque self-deception.” —
Mark Twain

Listening to NPR news today I was reminded how thoroughly this once independent voice has sold out.

I was also reminded of the Mark Twain quote above. NPR reported that
Syrians were lined up in Turkey waiting on passage on inflatable rafts
to Greece. According to the NPR report, there are 2 million Syrian
refugees in Turkey and 250,000 Syrians have been killed. NPR said
nothing about the cause of this murder and displacement of vast numbers
of people. It was if the plight of these people materialized out of
thin air. The fact that Washington sicced ISIS, al Qaeda, Turkey, the US
and NATO Air Forces, and Washington’s Middle Eastern vassals on Syria
was not mentioned. The view on NPR is the same as Washington’s — that
if only Assad would resign and hand Syria over to Washington, everything
would be fine.

Americans don’t go to bed every night unable to sleep from shame from
the atrocities that the US government has inflicted on Syria. And on
Iraq. And Libya. And Afghanistan. And Pakistan. And Yemen. And Somalia.
And Ukraine. And Serbia. According to the prostitute media, all of these
human catastrophes are the work of dark forces that America must
combat. It is all a clever orchestration of public emotion in favor of
the military/security complex’s bank balance.

The corruption of public discourse in America, indeed throughout the
West, is total. There are no reliable reports, not from public or
private institutions. The economic reports are propaganda to keep alive
the image of a successful America. The reports about Russia, Ukraine,
and Muslims are propaganda designed to inculcate fear in the gullible,
fear that ensures more power and profit for Washington and the
military/security complex.

Americans have proven themselves to be the easiest sheep ever to be shorn.

Bankruptcy and Economic Stagnation: Mass Layoffs Worldwide as Corporate Mergers near New Record

Major transnational corporations, including Kraft, Motorola,
Lenovo, Tyson and HTC have announced mass layoffs in recent days amid a
boom in mergers and acquisitions, which are on track to hit a record
this year.

Processed foods maker Kraft Heinz Co said Wednesday that it would cut
2,500 jobs in North America, amounting to 5 percent of its global
workforce. The announcement is the result of last month’s $49 billion
merger between Kraft and H.J. Heinz Co, in a deal orchestrated by Warren
Buffett’s Berkshire Hathaway.

The announced layoffs will include 700 at the company’s headquarters
in Northfield, Illinois, near Chicago. Thousands more layoffs are
expected as a result of the deal, as the company said it was “confident”
that it would meet its estimated cost savings from the merger of $1.5
billion through 2017.

On Thursday, Chinese computer maker Lenovo announced 3,200 layoffs,
or 5 percent of its global workforce. The layoffs will be concentrated
in the company’s Motorola Mobility subsidiary, which this week announced
an initial round of 500 layoffs in its Chicago-area headquarters.
Another three hundred employees will lose their jobs with the closure of
the company’s facility in Plantation, Florida. Lenovo purchased
Motorola Mobility from Google in 2014.

Also Thursday, Smartphone maker HTC announced that it would slash
2,250 jobs, or 15 percent of its global workforce, by the end of the
year. The company is seeking to cut costs by 35 percent.

These layoffs follow last month’s announcement by Microsoft that it
would eliminate 7,800 positions, mostly from its Nokia mobile phone
division that it acquired in 2013. Only weeks later, San Diego-based
semiconductor company Qualcomm Incorporated announced 4,700 layoffs.

Earlier this month, Alpha Natural Resources, America’s second-largest
coal producer, filed for bankruptcy, endangering the jobs of the
company’s 8,000 employees. Oil consulting firm Swift Worldwide Resources
reported in June that over 150,000 energy sector jobs have been lost
globally since the beginning of the downturn in oil prices last year.

Samson’s bankruptcy filing followed the announcement by multinational
oil giant Royal Dutch Shell that it would eliminate 6,500 positions
this year, as well as the announcement by British-based mining
conglomerate Anglo American, the world’s fifth largest mining company,
that it would slash 53,000 jobs.

The latest round of mass layoffs is closely related to the global
boom in mergers and acquisitions. Under conditions of slowing global
economic growth, together with record amounts of cash sitting on
corporate balance sheets, Wall Street is using mergers and acquisitions
to put additional pressure on US and global corporations to cut costs
and restore profitability on the backs of employees.

Global mergers and acquisitions are close to hitting a record high
this year, according to Thomson Reuters data. With a quarter of the year
still to go, the value of deals hit $2.9 trillion, just shy of the $3
trillion figure for 2007, immediately before the 2008 financial crisis.
In the United States, mergers have hit $1.4 trillion in 2015, up by 62
percent from a year ago.

On Monday, Warren Buffett’s Berkshire Hathaway announced the biggest
corporate takeover so far this year: the $37 billion purchase of
Precision Castparts, an aerospace and defense metal fabricator with
nearly 30,000 employees.

The growing rate of mergers and acquisitions is made possible by the
continual infusion of cheap money from global central banks, which have
pumped trillions of dollars into the global financial system through
years of quantitative easing and zero-interest-rate policies.

Mergers activity has soared even as real economic growth has slowed.
According to predictions by the International Monetary Fund, 2015 is set
to be the slowest year for economic growth since 2009. The already
gloomy growth outlook for the year was made worse Friday with the
release of economic data for the Eurozone showing that the region’s
economy grew only 0.3 percent in the second quarter; significantly lower
than had been predicted by analysts.

This followed Friday’s release of negative economic figures for
China, which showed that the country’s exports plunged by 8.3 percent in
July. China’s poor exports performance likely contributed to its
central bank’s decision to devalue the yuan this week, a move that
roiled the global financial system.

The global boom in mergers and acquisitions, far from expanding
economic output and growth, has as its aim the enrichment of
shareholders through layoffs and wage cuts. The end result of this
vicious cycle of economic stagnation and parasitism is the further
enrichment of the financial oligarchy at the expense of the working
class.

One question is: Can the Islamist Revolution unleashed by Washington
be contained? Or have Washington and its NATO vassals killed so many
Muslims and destroyed so many countries and institutions that there is
nothing left to organize against the Revolution? If this is the case,
then Russia and Iran are making a fundamental strategic mistake by
cooperating with Washington against the Islamist Revolution. Instead,
Russia and Iran should unite with the Revolution against the hated West.

At some point, if Muslims are to have a future, the historic split
between Shia and Sunni must end. The Iranians should take the lead in
bringing the split to an end. Russia and Iran should be helping the
Middle East to achieve self-determination free of Western control and
interventions. That is the only way to peace.

Argentina has now taken the US to The Hague for blocking the
country’s 2005 settlement with the bulk of its creditors. The issue
underscores the need for an international mechanism for nations to go
bankrupt. Better yet would be a sustainable global monetary scheme that
avoids the need for sovereign bankruptcy.

Argentina was the richest country in Latin America before decades of
neoliberal and IMF-imposed economic policies drowned it in debt. A
severe crisis in 2001 plunged it into the largest sovereign debt default
in history. In 2005, it renegotiated its debt with most of its
creditors at a 70% “haircut.” But the opportunist “vulture funds,” which
had bought Argentine debt at distressed prices, held out for 100 cents
on the dollar.

Paul Singer’s Elliott Management has spent over a decade
aggressively trying to force Argentina to pay down nearly $1.3 billion
in sovereign debt. Elliott would get about $300 million for bonds that
Argentina claims it picked up for $48 million. Where most creditors have
accepted payment at a 70% loss, Elliott Management would thus get a
600% return.

In June 2014, the US Supreme Court declined to hear an appeal of a
New York court’s order blocking payment to the other creditors until the
vulture funds had been paid. That action propelled Argentina into
default for the second time in this century – and the eighth time since
1827. On August 7, 2014, Argentina asked the International Court of Justice in the Hague to take action against the United States over the dispute.

Who is at fault? The global financial press blames Argentina’s own
fiscal mismanagement, but Argentina maintains that it is willing and
able to pay its other creditors. The fault lies rather with the vulture
funds and the US court system, which insist on an extortionate payout
even if it means jeopardizing the international resolution mechanism for
insolvent countries. If creditors know that a few holdout vultures can
trigger a default, they are unlikely to settle with other insolvent
nations in the future.

Blame has also been laid at the feet of the IMF and the international
banking system for failing to come up with a fair resolution mechanism
for countries that go bankrupt. And at a more fundamental level, blame
lies with a global debt-based monetary scheme that forces bankruptcy on
some nations as a mathematical necessity. As in a game of musical
chairs, some players must default.

Most money today comes into circulation
in the form of bank credit or debt. Debt at interest always grows
faster than the money supply, since more is always owed back than was
created in the original loan. There is never enough money to go around
without adding to the debt burden. As economist Michael Hudson points out, the debt overhang grows exponentially until it becomes impossible to repay. The country is then forced to default.

Fiscal Mismanagement or Odious Debt?

Besides impossibility of performance, there is another defense
Argentina could raise in international court – that of “odious debt.”
Also known as illegitimate debt, this legal theory holds
that national debt incurred by a regime for purposes that do not serve
the best interests of the nation should not be enforceable.

The defense has been used successfully by a number of countries,
including Ecuador in December 2008, when President Rafael Correa
declared that its debt had been contracted by corrupt and despotic prior
regimes. The odious-debt defense allowed Ecuador to reduce the sum owed
by 70%.

In a compelling article in Global Research in November 2006, Adrian Salbuchi made a similar case for Argentina.
He traced the country’s problems back to 1976, when its foreign debt
was just under US$6 billion and represented only a small portion of the
country’s GDP. In that year:

An illegal and de facto military-civilian regime ousted
the constitutionally elected government of president María Isabel
Martínez de Perón [and] named as economy minister, José Martinez de Hoz,
who had close ties with, and the respect of, powerful international
private banking interests. With the Junta’s full backing, he
systematically implemented a series of highly destructive, speculative,
illegitimate – even illegal – economic and financial policies and
legislation, which increased Public Debt almost eightfold to US$ 46
billion in a few short years. This intimately tied-in to the interests
of major international banking and oil circles which, at that time,
needed to urgently re-cycle huge volumes of “Petrodollars” generated by
the 1973 and 1979 Oil Crises. Those capital in-flows were not invested
in industrial production or infrastructure, but rather were used to fuel
speculation in local financial markets by local and international banks
and traders who were able to take advantage of very high local interest
rates in Argentine Pesos tied to stable and unrealistic medium-term US
Dollar exchange rates.

Salbuchi detailed Argentina’s fall from there into what became a $200
billion debt trap. Large tranches of this debt, he maintained, were
“odious debt” and should not have to be paid:

Making the Argentine State – i.e., the people of
Argentina – weather the full brunt of this storm is tantamount to
financial genocide and terrorism. . . . The people of Argentina are
presently undergoing severe hardship with over 50% of the population
submerged in poverty . . . . Basic universal law gives the Argentine
people the right to legitimately defend their interests against the
various multinational and supranational players which, abusing the huge
power that they wield, directly and/or indirectly imposed complex
actions and strategies leading to the Public Debt problem.

Of President Nestor Kirchner’s surprise 2006 payment of the full $10 billion owed to the IMF, Salbuchi wrote cynically:

This key institution was instrumental in promoting and
auditing the macroeconomic policies of the Argentine Government for
decades. . . . Many analysts consider that . . . the IMF was to
Argentina what Arthur Andersen was to Enron, the difference being that
Andersen was dissolved and closed down, whilst the IMF continues
preaching its misconceived doctrines and exerts leverage. . . . [T]he
IMF’s primary purpose is to exert political pressure on indebted
governments, acting as a veritable coercing agency on behalf of major
international banks.

Sovereign Bankruptcy and the “Global Economic Reset”

Needless to say, the IMF was not closed down. Rather, it has gone on
to become the international regulator of sovereign debt, which has
reached crisis levels globally. Total debt, public and private, has grown by over 40% since 2007, to $100 trillion. The US national debt alone has grown from $10 trillion in 2008 to over $17.6 trillion today.

At the World Economic Forum in Davos in January 2014, IMF Managing Director Christine Lagarde spoke of the need for a global economic “reset.”
National debts have to be “reset” or “readjusted” periodically so that
creditors can keep collecting on their exponentially growing interest
claims, in a global financial scheme based on credit created privately
by banks and lent at interest. More interest-bearing debt must
continually be incurred, until debt overwhelms the system and it again
needs to be reset to keep the usury game going.

Sovereign debt (or national) in particular needs periodic “resets,”
because unlike for individuals and corporations, there is no legal
mechanism for countries to go bankrupt. Individuals and corporations
have assets that can be liquidated by a bankruptcy court and distributed
equitably to creditors. But countries cannot be liquidated and sold off
– except by IMF-style “structural readjustment,” which can force the
sale of national assets at fire sale prices.

Meanwhile, the IMF has backed collective action clauses (CACs)
designed to allow a country to negotiate with most of its creditors in a
way that generally brings all of them into the net. But CACs can be
challenged, and that is what happened in the case of the latest
Argentine bankruptcy. According to Harvard Professor Jeffrey Frankel:

[T]he US court rulings’ indulgence of a parochial
instinct to enforce written contracts will undermine the possibility of
negotiated restructuring in future debt crises.

We are back, he says, to square one.

Better than redesigning the sovereign bankruptcy mechanism might be
to redesign the global monetary scheme in a way that avoids the
continual need for a bankruptcy mechanism. A government does not need
to borrow its money supply from private banks that create it as credit
on their books. A sovereign government can issue its own currency,
debt-free. But that interesting topic must wait for a follow-up article.
Stay tuned.

Physicists Endorse Nuclear Deal with Iran

President Obama can now count many prominent U.S. physicists among
the supporters of the proposed nuclear weapons deal with Iran. The
agreement, reached between Iran, the U.S., and other world powers, now hinges on U.S. Congressional approval. On Saturday, a group of 29 scientists sent a letter
to the White House congratulating the President on the deal, called the
Joint Comprehensive Plan of Action. The plan would lift some sanctions
on Iran, and would put in place restrictions aimed at preventing Iran
from building a nuclear weapon.

The list of signers includes experts in nuclear weapons technologies
and nonproliferation, Nobel Prize winners, and former science advisors
to Congress and the White House. The scientists strongly support the
plan, calling it “innovative” and “stringent,” and stating that the deal
“will advance the cause of peace and security in the Middle East and
can serve as a guidepost for future non-proliferation agreements.”

The letter asserts that, prior to the beginning of negotiations, the
additional enrichment time necessary for Iran to create a nuclear weapon
was only a few weeks. The letter argues that the agreement would
increase that “breakout time” to many months, and would make it easier
for the U.S. to know if Iran began working towards nuclear weapons
capabilities.

Physicists who penned the letter include Richard Garwin, a physicist
who worked on the design of the first hydrogen bomb, plasma physicist
Robert Goldston of Princeton University, Frank von Hippel of Princeton
University, who served as assistant director for national security in
the White House Office of Science and Technology Policy, Rush Holt, a
former member of Congress and CEO of the American Association for the
Advancement of Science, and nuclear scientist R. Scott Kemp of the
Massachusetts Institute of Technology (MIT).

Many other prominent physicists signed the letter, including Nobel
laureates Philip Anderson of Princeton University, Leon Cooper of Brown
University, Sheldon Glashow of Boston University, David Gross of the
University of California, Santa Barbara, Burton Richter of Stanford
University, and Frank Wilczek of MIT.

Do you remember when real reporters existed? Those were the days
before the Clinton regime concentrated the media into a few hands and
turned the media into a Ministry of Propaganda, a tool of Big Brother.
The false reality in which Americans live extends into economic life.
Last Friday’s employment report was a continuation of a long string of
bad news spun into good news. The media repeats two numbers as if they
mean something—the monthly payroll jobs gains and the unemployment
rate—and ignores the numbers that show the continuing multi-year decline
in employment opportunities while the economy is allegedly recovering.

The so-called recovery is based on the U.3 measure of the
unemployment rate. This measure does not include any unemployed person
who has become discouraged from the inability to find a job and has not
looked for a job in four weeks. The U.3 measure of unemployment only
includes the still hopeful who think they will find a job.

The government has a second official measure of unemployment, U.6.
This measure, seldom reported, includes among the unemployed those who
have been discouraged for less than one year. This official measure is
double the 5.3% U.3 measure. What does it mean that the unemployment
rate is over 10% after six years of alleged economic recovery?

In 1994 the Clinton regime stopped counting long-term discouraged
workers as unemployed. Clinton wanted his economy to look better than
Reagan’s, so he ceased counting the long-term discouraged workers that
were part of Reagan’s unemployment rate. John Williams (shadowstats.com)
continues to measure the long-term discouraged with the official
methodology of that time, and when these unemployed are included, the US
rate of unemployment as of July 2015 is 23%, several times higher than
during the recession with which Fed chairman Paul Volcker greeted the
Reagan presidency.

An unemployment rate of 23% gives economic recovery a new meaning. It
has been eighty-five years since the Great Depression, and the US
economy is in economic recovery with an unemployment rate close to that
of the Great Depression.

The labor force participation rate has declined over the “recovery”
that allegedly began in June 2009 and continues today. This is highly
unusual. Normally, as an economy recovers jobs rebound, and people flock
into the labor force. Based on what he was told by his economic
advisors, President Obama attributed the decline in the participation
rate to baby boomers taking retirement. In actual fact, over the
so-called recovery, job growth has been primarily among those 55 years
of age and older. For example, all of the July payroll jobs gains were
accounted for by those 55 and older. Those Americans of prime working
age (25 to 54 years old) lost 131,000 jobs in July.

Over the previous year (July 2014 — July 2015), those in the age
group 55 and older gained 1,554,000 jobs. Youth, 16-18 and 20-24, lost
887,000 and 489,000 jobs.

Today there are 4,000,000 fewer jobs for Americans aged 25 to 54 than
in December 2007. From 2009 to 2013, Americans in this age group were
down 6,000,000 jobs. Those years of alleged economic recovery
apparently bypassed Americans of prime working age.

As of July 2015, the US has 27,265,000 people with part-time jobs, of
whom 6,300,000 or 23% are working part-time because they cannot find
full time jobs. There are 7,124,000 Americans who hold multiple
part-time jobs in order to make ends meet, an increase of 337,000 from a
year ago.

The young cannot form households on the basis of part-time jobs, but
retirees take these jobs in order to provide the missing income on their
savings from the Federal Reserve’s zero interest rate policy, which is
keyed toward supporting the balance sheets of a handful of giant banks,
whose executives control the US Treasury and Federal Reserve. With so
many manufacturing and tradable professional skill jobs, such as
software engineering, offshored to China and India, professional careers
are disappearing in the US.

The most lucrative jobs in America involve running Wall Street scams,
lobbying for private interest groups, for which former members of the
House, Senate, and executive branch are preferred, and producing schemes
for the enrichment of think-tank donors, which, masquerading as public
policy, can become law.

The claimed payroll jobs for July are in the usual categories
familiar to us month after month year after year. They are domestic
service jobs—waitresses and bartenders, retail clerks, transportation,
warehousing, finance and insurance, health care and social assistance.
Nothing to export in order to pay for massive imports. With scant growth
in real median family incomes, as savings are drawn down and credit
used up, even the sales part of the economy will falter.

Clearly, this is not an economy that has a future.

But you would never know that from listening to the financial media
or reading the New York Times business section or the Wall Street
Journal.

When I was a Wall Street Journal editor, the deplorable condition of the US economy would have been front page news.

This article establishes that the price of gold and silver in the
futures markets in which cash is the predominant means of settlement is
inconsistent with the conditions of supply and demand in the actual
physical or current market where physical bullion is bought and sold as
opposed to transactions in uncovered paper claims to bullion in the
futures markets. The supply of bullion in the futures markets is
increased by printing uncovered contracts representing claims to gold.
This artificial, indeed fraudulent, increase in the supply of paper
bullion contracts drives down the price in the futures market despite
high demand for bullion in the physical market and constrained supply.
We will demonstrate with economic analysis and empirical evidence that
the bear market in bullion is an artificial creation.

The law of supply and demand is the basis of economics. Yet the price
of gold and silver in the Comex futures market, where paper contracts
representing 100 troy ounces of gold or 5,000 ounces of silver are
traded, is inconsistent with the actual supply and demand conditions in
the physical market for bullion. For four years the price of bullion has
been falling in the futures market despite rising demand for possession
of the physical metal and supply constraints.

We begin with a review of basics. The vertical axis measures price.
The horizontal axis measures quantity. Demand curves slope down to the
right, the quantity demanded increasing as price falls. Supply curves
slope upward to the right, the quantity supplied rising with price. The
intersection of supply with demand determines price. (Graph 1)

A change in quantity demanded or in the quantity supplied
refers to a movement along a given curve. A change in demand or a
change in supply refers to a shift in the curves. For example, an
increase in demand (a shift to the right of the demand curve) causes a
movement along the supply curve (an increase in the quantity supplied).

Changes in income and changes in tastes or preferences toward an item
can cause the demand curve to shift. For example, if people expect that
their fiat currency is going to lose value, the demand for gold and
silver would increase (a shift to the right).

Changes in technology and resources can cause the supply curve to
shift. New gold discoveries and improvements in gold mining technology
would cause the supply curve to shift to the right. Exhaustion of
existing mines would cause a reduction in supply (a shift to the left).

What can cause the price of gold to fall? Two things: The demand for
gold can fall, that is, the demand curve could shift to the left,
intersecting the supply curve at a lower price. The fall in demand
results in a reduction in the quantity supplied. A fall in demand means
that people want less gold at every price. (Graph 2)

Alternatively, supply could increase, that is, the supply curve could
shift to the right, intersecting the demand curve at a lower price. The
increase in supply results in an increase in the quantity demanded. An
increase in supply means that more gold is available at every price.
(Graph 3)

To summarize: a decline in the price of gold can be caused by a
decline in the demand for gold or by an increase in the supply of gold.

A decline in demand or an increase in supply is not what we are
observing in the gold and silver physical markets. The price of bullion
in the futures market has been falling as demand for physical bullion
increases and supply experiences constraints. What we are seeing in the
physical market indicates a rising price. Yet in the futures market in
which almost all contracts are settled in cash and not with bullion
deliveries, the price is falling.

For example, on July 7, 2015, the U.S. Mint said that due to a
“significant” increase in demand, it had sold out of Silver Eagles (one
ounce silver coin) and was suspending sales until some time in August.
The premiums on the coins (the price of the coin above the price of the
silver) rose, but the spot price of silver fell 7 percent to its lowest
level of the year (as of July 7).

This is the second time in 9 months that the U.S. Mint could not keep
up with market demand and had to suspend sales. During the first 5
months of 2015, the U.S. Mint had to ration sales of Silver Eagles.
According to Reuters, since 2013 the U.S. Mint has had to ration silver
coin sales for 18 months. In 2013 the Royal Canadian Mint announced the
rationing of its Silver Maple Leaf coins: “We are carefully managing
supply in the face of very high demand. . . . Coming off strong sales
volumes in December 2012, demand to date remains very strong for our
Silver Maple Leaf and Gold Maple Leaf bullion coins.” During this entire
period when mints could not keep up with demand for coins, the price of
silver consistently fell on the Comex futures market. On July 24, 2015
the price of gold in the futures market fell to its lowest level in 5
years despite an increase in the demand for gold in the physical market.
On that day U.S. Mint sales of Gold Eagles (one ounce gold coin) were
the highest in more than two years, yet the price of gold fell in the
futures market.

How can this be explained? The financial press says that the drop in
precious metals prices unleashed a surge in global demand for coins.
This explanation is nonsensical to an economist. Price is not a
determinant of demand but of quantity demanded. A lower price does not
shift the demand curve. Moreover, if demand increases, price goes up,
not down.

Perhaps what the financial press means is that the lower price
resulted in an increase in the quantity demanded. If so, what caused the
lower price? In economic analysis, the answer would have to be an
increase in supply, either new supplies from new discoveries and new
mines or mining technology advances that lower the cost of producing
bullion.

There are no reports of any such supply increasing developments. To
the contrary, the lower prices of bullion have been causing reductions
in mining output as falling prices make existing operations
unprofitable.

There are abundant other signs of high demand for bullion, yet the
prices continue their four-year decline on the Comex. Even as massive
uncovered shorts (sales of gold contracts that are not covered by
physical bullion) on the bullion futures market are driving down price,
strong demand for physical bullion has been depleting the holdings of
GLD, the largest exchange traded gold fund. Since February 27, 2015, the
authorized bullion banks (principally JPMorganChase, HSBC, and Scotia)
have removed 10 percent of GLD’s gold holdings. Similarly, strong demand
in China and India has resulted in a 19% increase of purchases from the
Shanghai Gold Exchange, a physical bullion market, during the first
quarter of 2015. Through the week ending July 10, 2015, purchases from
the Shanghai Gold Exchange alone are occurring at an annualized rate
approximately equal to the annual supply of global mining output.

India’s silver imports for the first four months of 2015 are 30%
higher than 2014. In the first quarter of 2015 Canadian Silver Maple
Leaf sales increased 8.5% compared to sales for the same period of 2014.
Sales of Gold Eagles in June, 2015, were more than triple the sales for
May. During the first 10 days of July, Gold Eagles sales were 2.5 times
greater than during the first 10 days of June.

Clearly the demand for physical metal is very high, and the ability
to meet this demand is constrained. Yet, the prices of bullion in the
futures market have consistently fallen during this entire period. The
only possible explanation is manipulation.

Precious metal prices are determined in the futures market, where
paper contracts representing bullion are settled in cash, not in markets
where the actual metals are bought and sold. As the Comex is
predominantly a cash settlement market, there is little risk in
uncovered contracts (an uncovered contract is a promise to deliver gold
that the seller of the contract does not possess). This means that it is
easy to increase the supply of gold in the futures market where price
is established simply by printing uncovered (naked) contracts. Selling
naked shorts is a way to artificially increase the supply of bullion in
the futures market where price is determined. The supply of paper
contracts representing gold increases, but not the supply of physical
bullion.

As we have documented on a number of occasions (see, for example, http://www.paulcraigroberts.org/2014/12/22/lawless-manipulation-bullion-markets-public-authorities-paul-craig-roberts-dave-kranzler/
), the prices of bullion are being systematically driven down by the
sudden appearance and sale during thinly traded times of day and night
of uncovered future contracts representing massive amounts of bullion.
In the space of a few minutes or less massive amounts of gold and silver
shorts are dumped into the Comex market, dramatically increasing the
supply of paper claims to bullion. If purchasers of these shorts stood
for delivery, the Comex would fail. Comex bullion futures are used for
speculation and by hedge funds to manage the risk/return characteristics
of metrics like the Sharpe Ratio. The hedge funds are concerned with
indexing the price of gold and silver and not with the rate of return
performance of their bullion contracts.

A rational speculator faced with strong demand for bullion and
constrained supply would not short the market. Moreover, no rational
actor who wished to unwind a large gold position would dump the entirety
of his position on the market all at once. What then explains the
massive naked shorts that are hurled into the market during thinly
traded times?

The bullion banks are the primary market-makers in bullion futures.
They are also clearing members of the Comex, which gives them access to
data such as the positions of the hedge funds and the prices at which
stop-loss orders are triggered. They time their sales of uncovered
shorts to trigger stop-loss sales and then cover their short sales by
purchasing contracts at the price that they have forced down, pocketing
the profits from the manipulation

The manipulation is obvious. The question is why do the authorities tolerate it?

Perhaps the answer is that a free gold market serves both to protect
against the loss of a fiat currency’s purchasing power from exchange
rate decline and inflation and as a warning that destabilizing systemic
events are on the horizon. The current round of on-going massive short
sales compressed into a few minutes during thinly traded periods began
after gold hit $1,900 per ounce in response to the build-up of troubled
debt and the Federal Reserve’s policy of Quantitative Easing.
Washington’s power is heavily dependent on the role of the dollar as
world reserve currency. The rising dollar price of gold indicated rising
discomfort with the dollar. Whereas the dollar’s exchange value is
carefully managed with help from the Japanese and European central
banks, the supply of such help is not unlimited. If gold kept moving up,
exchange rate weakness was likely to show up in the dollar, thus
forcing the Fed off its policy of using QE to rescue the “banks too big
to fail.”

The bullion banks’ attack on gold is being augmented with a spate of
stories in the financial media denying any usefulness of gold. On July
17 the Wall Street Journal declared that honesty about gold requires
recognition that gold is nothing but a pet rock. Other commentators
declare gold to be in a bear market despite the strong demand for
physical metal and supply constraints, and some influential party is
determined that gold not be regarded as money.

Why a sudden spate of claims that gold is not money? Gold is
considered a part of the United States’ official monetary reserves,
which is also the case for central banks and the IMF. The IMF accepts
gold as repayment for credit extended. The US Treasury’s Office of the
Comptroller of the Currency classifies gold as a currency, as can be
seen in the OCC’s latest quarterly report on bank derivatives activities
in which the OCC places gold futures in the foreign exchange
derivatives classification.

The manipulation of the gold price by injecting large quantities of
freshly printed uncovered contracts into the Comex market is an
empirical fact. The sudden debunking of gold in the financial press is
circumstantial evidence that a full-scale attack on gold’s function as a
systemic warning signal is underway.

It is unlikely that regulatory authorities are unaware of the
fraudulent manipulation of bullion prices. The fact that nothing is done
about it is an indication of the lawlessness that prevails in US
financial markets.

Paul Craig Roberts, Ph.D., is a former Assistant Secretary of the U.S. Treasury.

Dave Kranzler is a University of Chicago MBA and is an active participant in financial markets.

About Me

B.S. in Physics, Carnegie-Mellon University, 1960 Ph.D. in Physics, Brown University, 1966. Fellow, American Physical
Society. Fellow, American Association for the Advancement of Science.
Fellow, American Ceramic Society. Member, Geological Society of America, Research Physicist at Naval Research Laboratory (NRL), Washington, DC,
1967-2001. Fulbright-García Robles Fellow at Universidad Nacional
Autónoma de México, 1997. Invited Professor of Research at Universités
de Paris-6 & 7, Lyon-1, et St-Etienne (France) and Tokyo Institute
of Technology, 2000-2004. Adjunct Professor of Materials Science and
Engineering, University of Arizona, 2004-2005. Consultancy: impactGlass
research international, 2005-present.
Winner, one national and two international research awards and honored
by Brown University with a "Distinguished Graduate School Alumnus
Award." Author, 198 papers in peer-reviewed journals and books, Principal Author of 114 of these.